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Here are the prepared testimonies of Howard Glaser, director of state operations, and PEF President Kenneth Brynien.

These are as prepared, I must stress, but they give a measure of where these guys are at. I’ll start with Glaser:

Chairman DeFrancisco, Chairman Farrell, and members of the Committees. My name is Howard Glaser, Director of State Operations. I appreciate the opportunity to appear before you and to offer testimony on Governor Cuomo’s Executive Budget for 2011-12 with respect to matters pertaining to the State workforce. I am joined today by Gary Johnson, Director of the Governor’s Office of Employee Relations, and Patricia Hite of the Department of Civil Service.

I am also joined this morning by two experts who the Governor is announcing today will help lead the administration’s effort to work with our labor partners on achieving workforce savings. Many of you know Joe Bress, one of the State’s most distinguished public servants. Joe has served as Director of the Governor’s Office of Employee Relations, and Chair and Executive Director of the NYS Ethics Commission. After leaving New York State, Joe served for the past 15 years as Vice President for Labor Relations at Amtrak. We are gratified that he has agreed to come out of retirement to take on one more challenge here in NY.

Todd Snyder is a Senior Managing Director at Rothschild, and co-head of Rothschilds restructuring and reorganization group. He is among the nation’s leading reorganization experts and in that context has industry leading experience negotiating labor related restructuring agreements. He advised the Bush and Obama administrations on the restructuring of the auto industry, and he has represented United Airlines and dozens of other companies their workouts. Given that, as Governor Cuomo pointed out in his budget presentation, New York State is “functionally bankrupt”, Todd’s expertise will bring a valuable perspective to the restructuring of our state’s labor agreements.

Let me state at the outset that Governor Cuomo and this administration have the utmost respect and appreciation for the over 180,000 executive branch employees who serve the people of this state day in and day out. From correction officers to motor vehicle clerks to food inspectors and everything in between, our state employees are key to the delivery of vital services to New Yorkers. And it is in that spirit that we approach the challenges of the 2011-12 budget.

One of the fundamental principles of the Governor’s budget is to redesign and reinvent our state government with the goal of improving services while producing cost savings. We are seeking better performance, not simply looking to fill a budget gap. We believe that our workforce and their representatives can be and will be an important source of ideas and solutions to the challenges that we face.

And those challenges are significant — there is no path to fiscal stability that does not take into account the resources we expend on the workforce. Labor costs are a significant portion of state spending, comprising almost 20% of general funds expenditures, or about $12.5 billion annually. And these costs have been rising rapidly. The average compensation and benefits for state employees has increased 14% during the past three years even while private sector wages in New York State dropped 8.8% from 2008 to 2009 alone. The average compensation (for wages only) for state employees today is $67,200.00. That far outstrips the average New York income of $46,957. The “all-in” compensation for state employees –including benefits– today stands at $99,745.

Over the past decade we have seen generous across the board increases: iin wages –up 38%–, in health insurance benefits -up 100%-, and in pension benefits–up 382%. As with much in the state’s spending habits, this growth is simply unsustainable.

At these levels, there can be no serious attempt to solve the state’s $10 billion deficit without addressing workforce spending. Nonetheless, recognizing the critical role of the workforce, we are working hard to wield a scalpel, not an ax, on labor costs. The Executive Budget reflects that, with early agreement by employee representatives, we can hold workforce cost reductions to $450 million. This amounts to about 5% of the $10 billion deficit, even though workforce costs amount to 20% of the general fund budget. And the $450 million itself amounts to only about one-third of the projected reduction in of $1.4 billion in state operations. A significant reduction in state operations is expected to come from $485 million in non-personal services reductions in contractors and consultants to supplies and other efficiencies, not in workforce savings. In fact, today, we are taking a major step in the reduction of the costs of contracting. I am pleased to announce that today Governor Cuomo is issuing an Executive Order which will reduce the cost of personal services contracts used by New York State agencies by 10%. Under the Order, agencies will be permitted to renew consultant contracts only if the contractor agrees to the reduction. This action reflects the Governor’s philosophy that we must reduce costs and increase performance in every area of state operations.

We are confident that working together with the State’s labor representatives, the targeted $450 million in workforce savings can be achieved without resorting to layoffs. I want to emphasize that our approach is one of constructive engagement with the workforce in determining how to achieve these savings. We have already begun discussions with the public employee unions to discuss the areas of cost reductions.

The Administration believes there are many options to effect the necessary savings on a recurring basis without resorting to the estimated 9800 layoffs that would be necessary to achieve $450 million in savings if our efforts at constructive engagement fail.

Let me give you just a few illustrations of how realigning New York’s approach to workforce costs can avert layoffs.

New York State employees contribute a smaller share towards their health benefit coverage than public employees in other large states such as Massachusetts, Colorado, California and Michigan. State employees contribute significantly less than Federal government employees for health benefit coverage. If NYS were to adopt changes to bring health care contributions in line with these levels, that action, in and of itself, could avert over 7500 layoffs.

The health care plans we offer our employees cost too much and deliver too little. And these plans often diverge from the structure of non-public health plans. For example, in New York, a state employee who is a smoker pays the same premium as a non-smoker, essentially subsidizing behavior that is unhealthy for the employee and costly to the state. If New York makes sensible design changes within the health plans, such as addressing co-pays and deductibles and incentivizing healthy choices, we could avert over 5500 layoffs.

And although the state budget anticipates a zero percent increase in base wages, many state employees would in fact see increases over their base salary through longevity and “step” increases amounting to a 2-4% real wage increase in the coming year. Freezing these payments — as our management employees have done — could alone avert over 3400 layoffs.

Another example where New York is out of step with the private sector and even other public employees is the treatment of overtime. In New York, an employee can take 4 days of vacation on Monday through Thursday, work 12 hours on Friday — and be paid at the overtime rate, even though they only worked 12 hours for the week. These practices are cannot be defended in the state’s current fiscal environment and when so many in the private sector are living a distinctly different reality. If NYS were to adopt rational overtime reforms, almost 1500 layoffs could be averted.

The solutions are not draconian. A true wage freeze including a rational approach to planned step advances and longevity payments would still leave state employees with a compensation package that is far more generous than that of the average New Yorker. In the area of employee and retiree health benefits, employees can continue to receive exceptional coverage while sharing a little more in the cost of such coverage. And these approaches are just illustrations. If there are better ideas, we are open to them.

In closing let me say that we are committed to working with our state employee partners to achieve these savings. We know that partnership can work. Just last week, Governor Cuomo’s Medicaid Redesign Team, comprised of industry stakeholders who have often been passionately at odds, came together to find over $2 billion in savings. Our target is proportionately smaller, we have very dedicated and talented teams on both sides, and I am confident that together we will find solutions that strengthen the state, are fair to our workers, and provide better service and value to our taxpayers.

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